January 28, 2020 / 2:16 PM / 2 months ago

UPDATE 1-Romania's 2019 budget deficit stood at 4.6% of GDP

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BUCHAREST, Jan 28 (Reuters) - Romania ran a higher-than-expected consolidated budget deficit of 4.6% of gross domestic product last year, driven by one-off expenses and uncollected revenue from dividends, Finance Minister Florin Citu said on Tuesday.

The shortfall, significantly above the European Union’s ceiling of 3% of GDP, risks triggering an excessive deficit procedure from the European Commission, which could push up Romania’s borrowing costs and put pressure on its leu currency.

Citu’s Liberal minority government, which came to power in November after the collapse of a Social Democrat cabinet, aims to lower the deficit to 3.6% of GDP this year and to below 3% by 2022.

On Tuesday, Citu said the 2019 deficit, which was 0.2 percentage points above target, would not have an impact on this year’s deficit.

The European Commission, ratings agencies and analysts have warned a 40% hike in pensions from September, approved by the Social Democrats last year, posed the biggest challenge to Romania’s budget this year and next.

Faced with local and parliamentary elections this year, the Liberals have repeatedly said they plan to push the hike through.

However, earlier this year, Prime Minister Ludovic Orban said the increase, the largest in three decades, was not “100% guaranteed” and depended on economic developments and better tax collection.

Throughout their three years in power, the Social Democrats went back and forth on tax plans, hiked state wages and pensions at the expense of infrastructure investment and introduced measures without impact assessment and public debate.

In nominal terms, the deficit stood at 48.3 billion lei ($11.22 billion) at the end of December. Budget revenue totalled 321.13 billion lei, or 30.9% of GDP. ($1 = 4.3063 lei) (Reporting by Luiza Ilie; Editing by Kirsten Donovan)

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